New Delhi: Canara Bank has increased its Marginal Cost of Funds Based Lending Rate (MCLR) on several loan tenures with effect from August 12, 2026, potentially raising borrowing costs for customers whose loans are linked to the benchmark.
Following the latest revision, Canara Bank’s MCLR now ranges between 7.95% and 9.10%, compared with the earlier range of 7.95% to 9.05%. The bank announced the revision through an exchange filing on August 11.
The latest change affects the one-month, three-month, six-month, one-year, two-year and three-year MCLR. The overnight MCLR has been left unchanged at 7.95%.
Canara Bank’s latest MCLR rates
Canara Bank has raised the MCLR by 5 basis points (0.05 percentage point) across the affected tenures.
| Loan tenure | Earlier MCLR | New MCLR |
|---|---|---|
| Overnight | 7.95% | 7.95% |
| One month | 8.00% | 8.05% |
| Three months | 8.25% | 8.30% |
| Six months | 8.60% | 8.65% |
| One year | 8.75% | 8.80% |
| Two years | 9.00% | 9.05% |
| Three years | 9.05% | 9.10% |
The revised rates are effective from August 12, 2026.
What is MCLR?
MCLR, or Marginal Cost of Funds Based Lending Rate, is a benchmark used by banks to determine the minimum lending rate for certain loans.
Introduced by the Reserve Bank of India (RBI) in 2016, MCLR is linked to the bank’s marginal cost of funds and other factors.
When a bank increases its MCLR, borrowers with loans linked to the relevant MCLR can see their effective lending rate increase when their loan’s reset date arrives.
However, the impact is not necessarily immediate for every borrower. The effect depends on the benchmark to which the loan is linked and the reset frequency specified in the loan agreement.
One-year MCLR rises to 8.80%
The one-year MCLR, which is an important benchmark for several loans, has increased from 8.75% to 8.80%.
The 5-basis-point increase may appear small, but even a marginal change in the interest rate can affect the total interest paid over a long repayment period, particularly for large loans.
For borrowers with long-term loans, the impact will depend on the outstanding principal, remaining tenure, interest rate and reset mechanism.
Customers should therefore check their loan documents rather than assuming that the MCLR increase will immediately change their EMI.
Two-year and three-year rates also increase
Canara Bank has raised its longer-duration MCLR as well.
The two-year MCLR has increased from 9.00% to 9.05%, while the three-year MCLR has moved from 9.05% to 9.10%. Both rates have increased by 5 basis points.
The three-year rate is now the highest among Canara Bank’s listed MCLR tenures at 9.10%.
The overnight MCLR, meanwhile, remains unchanged at 7.95%.
Will home loan EMIs increase?
The MCLR revision does not automatically mean that every Canara Bank home loan customer’s EMI will rise from August 12.
The actual impact depends on whether the loan is linked to MCLR and when its interest-rate reset takes place.
Loans based on an external benchmark, such as the repo rate, follow a different mechanism. Canara Bank’s current lending-rate information also lists its Repo Linked Lending Rate (RLLR) at 8.00% with effect from July 12, 2026.
Therefore, borrowers should first identify the benchmark applicable to their loan.
Borrowers should check their loan benchmark
Existing customers can check their sanction letter, loan agreement or latest statement to determine whether their borrowing is linked to MCLR, RLLR or another benchmark.
The benchmark is important because a change in MCLR primarily affects loans that are actually linked to that benchmark.
For a borrower whose loan is linked to an external benchmark, an MCLR revision alone does not necessarily result in a corresponding increase in the interest rate.
How a higher lending rate affects a borrower
A higher interest rate can affect a floating-rate loan in two main ways.
The lender may increase the EMI, allowing the borrower to repay the loan within approximately the same remaining tenure.
Alternatively, the lender may retain the EMI and extend the repayment period, depending on the loan terms and applicable policies.
For a large home loan with many years remaining, even a small increase in the rate can increase the total interest payable over the life of the loan.
The precise impact, however, varies from borrower to borrower.
Example of the potential impact
Consider a borrower with an outstanding loan of Rs 50 lakh and a remaining tenure of 20 years.
If the effective lending rate increases by 0.05 percentage point, the change in the EMI may be relatively modest compared with the total monthly payment.
However, because the borrower makes payments over many years, even a small change can affect the cumulative interest cost.
This example is only illustrative. The actual EMI impact depends on the borrower’s existing rate, outstanding principal, remaining tenure and reset date.
Canara Bank’s other lending rates
Canara Bank’s official lending-rate information shows that its retail loan rates vary according to the type of product and the borrower’s circumstances. Its published range for housing loans is 7.15% to 10.00%, while vehicle loans are listed in a range of 7.45% to 15.00%.
These ranges should not be confused with MCLR.
MCLR is a benchmark rate, whereas the final interest rate charged to a customer can depend on the product, borrower profile, spread and other applicable factors.
Therefore, the latest MCLR should not be interpreted as the interest rate that every Canara Bank borrower will pay.
What borrowers should do now
Customers with Canara Bank floating-rate loans can take a few steps after the latest revision.
Check the loan agreement
Borrowers should verify whether their loan is linked to MCLR and identify the applicable MCLR tenure.
Check the reset date
Even if the loan is MCLR-linked, the revised rate may apply only from the next reset date specified in the loan agreement.
Review the EMI
Customers should monitor their next loan statement to determine whether the interest rate or repayment schedule has changed.
Consider prepayment carefully
Borrowers with surplus funds may consider partial prepayment if the higher interest cost becomes a concern. However, they should compare the benefit of reducing the loan balance with the potential returns from alternative uses of the money.
Avoid unnecessary financial stress
A 5-basis-point increase is relatively small. Borrowers should not make major financial decisions solely because of the headline rate revision without checking their individual loan terms.
Why MCLR changes matter
MCLR revisions are closely watched because lending rates influence household borrowing costs as well as business financing costs.
When lending rates rise, borrowers can face higher interest expenses. When rates fall, the opposite can happen for eligible floating-rate borrowers.
The latest Canara Bank revision is therefore relevant to customers with MCLR-linked loans, although the actual impact varies depending on the loan product and reset mechanism.
Canara Bank has revised rates several times
The latest move also comes after earlier changes to the bank’s lending rates during 2026.
Canara Bank’s official disclosures list previous MCLR revisions, including a revision effective June 12, 2026.
The bank’s lending-rate page also provides current benchmark and loan-rate information for customers.
This makes it important for existing borrowers to look at the latest applicable rate rather than relying on an older loan statement or previously published MCLR table.
What the latest hike means for borrowers
The key takeaway is that Canara Bank has raised MCLR by 5 basis points on six of its seven listed tenures.
The overnight rate remains unchanged, while rates for one month, three months, six months, one year, two years and three years have all increased by 5 basis points.
The revised MCLR range of 7.95% to 9.10% is effective from August 12.
For borrowers, the immediate priority should be to establish whether their loan is MCLR-linked and, if so, when the revised rate will be applied.
Conclusion
Canara Bank has increased its MCLR on select tenures by 5 basis points, effective August 12, 2026. The bank’s MCLR now ranges from 7.95% to 9.10%, compared with 7.95% to 9.05% previously.
The one-month MCLR has risen to 8.05%, three-month to 8.30%, six-month to 8.65%, one-year to 8.80%, two-year to 9.05% and three-year to 9.10%. The overnight MCLR remains unchanged at 7.95%.
The revision could increase borrowing costs for customers with loans linked to the affected MCLR tenures, but not every borrower will see an immediate EMI increase. The actual effect depends on the loan’s benchmark, reset date and repayment structure.
Borrowers should therefore check their loan documents and upcoming statements before assessing the impact of the latest Canara Bank lending-rate hike.
